Wednesday, October 01, 2008

The Ontario-based Common Cause/Linchpin platformist group has been gradually organizing in their province, all the time producing regular issues of their magazine Linchpin. All of this activity is a tribute to their determination to make anarchism a living reality for ordinary people and not a subculture or a cult. As such they address things that concern the majority, and one of these is our present economic crisis. Here's an essay from the group about what is happening now with financial institutions.

Debt and Exploitation: The Coming Economic Crisis:‏
Debt and Exploitation: The Coming Economic Crisis
Oct. 1, 2008
Unless you have been stuck in a cave somewhere over the past few weeks, you have no doubt heard about the financial crisis south of the border. You have also likely heard Canadian officials and business people claim that the Canadian economy is doing just fine and is immune from the US turmoil. We can hardly expect them to say otherwise, not least during an election. But in fact there is more than a good chance that Canada will follow the US into a major economic crisis.(an actual certainty-Molly)
If this does happen it will not be just because financial deregulation has allowed the banks to risk our savings on the crisis-ridden financial markets. It will also not be just because investors have created new and high-risk ways to play the global financial casino. It will not even be just because the US market, where most of Canada's exports go, will have closed shop. For sure, financial deregulation and so-called "free trade" shoulder a lot of the blame for this mess. But the fundamental source of the problem goes beyond these policies. We are about to reach the limits of the economic model that has been imposed on us for the past 30 years.
This model can be called the "low wage/high debt" economic model. Beginning in the early 1980s it has come to replace the old "high wage/high production" model. Under the old model, companies sought to turn big wage gains made by workers' struggles into profits by: a)demanding a faster pace of work (higher productivity) and b) by encouraging a culture of consumerism so that workers would use their high wages to buy the vast amount of goods being produced. This came to be know as the productivity deal.
At the end of the 1970s workers began to break this cycle by demanding and winning both higher wages and social services (a higher social wage) while refusing to increase the pace of work which had already reached super-human speeds. Thus companies found their profits under attack as the better quality of life for workers came to clash with the needs of bosses to make a profit.
In response governments all over the world and of all political stripes began to attack the wage and social services gains made by workers. In Canada this began with the Mulroney government and has continued to this day regardless of which party has been in power. And this attack has largely been successful. A recent study by the Canadian Centre for Policy Alternatives shows that real wages today(that is when inflation is taken into account) are at the same level as the 1970s. At the same time, spending on social services has been drastically cut. Hence the "low-wage" part of the new economic model.
But low wages present a major problem for profits. If wages are too low than workers cannot afford to buy the increasing number of goods being produced. The misery that this means for workers is not the problem from the point of view of business. The problem is that if goods cannot be sold then profits are not made. This is a classic problem of overproduction. The low-wage model is thus inherently unsustainable.(Molly has to disagree here. As I have said before the present economic crisis is the furthest thing from a "crisis of overproduction" imaginable. Let's debate the here and now rather than a "crisis", according to Marxist economic theory)
One way that big business and big government have tried to get around this problem is by pushing through free trade policies like NAFTA and the upcoming Security and Prosperity Partnership (SPP) that let companies sell their goods all over the globe. In this way, companies can reduce their dependence on the wages or consumption power of their Canadian workers. However this has not really solved the problem of overproduction since the wages of all workers everywhere have been under attack. In the case of Canada, the wages of the American worker,our biggest export market, have been reduced even more than Canadian workers.(Maybe, but inflation adjusted purchasing power statistics may tell a different story-Molly) At best, free trade only delays the day of reckoning.
Another strategy is to lower the price of goods consumed by one group of workers by reducing the wages of another group of workers. This is the true meaning of Wal-Mart. By super-exploiting workers in China and other countries, companies can lower their prices to a point where workers in Canada can afford them despite their lower wages. In this way the sweat and blood of workers overseas is used to build a thin and tattered safety net for Canadian workers. But this strategy is also unsustainable.
For one, super-exploited workers always resist, driving up wages. For example, China is brimming with workers struggles (the China Labour Bulletin reports tens of thousands of strikes and other workplace stoppages per year). These have recently forced the Chinese government to pass a new labour law that contains some gains for workers. Further, the prices of key goods cannot be reduced in this way. Goods such as houses, cars, education and others require such high levels of work and technology that no matter how low wages get, they will always cost thousands of dollars. If workers cannot afford to buy these goods in large quantities, profits cannot be realized and crisis follows. But this has not yet happened. Why?
This brings us to the second part of the "low wage/high debt" economic model. The availability of cheap credit has allowed workers to borrow large sums of money and consume way past their means. This reason,more than any other, explains why the low-wage economy has not yet come to a grinding halt. Low mortgage interest rates, zero-percent car financing, credit cards in every wallet and a "pay day" loan shop at every corner have allowed high levels of consumption to continue even as wages are reduced. For companies this is the best of both worlds. Low wages combined with high sales mean astronomical profits. For workers this has meant insecurity at work and anxiety over soaring debts. None of this is a problem for business as long as it continues. But you don't need a PhD in economics to figure out that eventually people will not be able to make payments on their loans with decreasing wages and rising interest rates.
This is precisely what is happening now in the US housing market where millions of Americans have had their homes taken away as they are unable to pay their mortgages. The fact that banks and investors turned these loans into stocks and gambled with them on the financial markets, losing trillions in the process, is a serious issue. But in the long run it is not as serious as the fact that millions of workers in the US are defaulting on their debts. In addition to housing,credit card debt in the US totals nearly 1 trillion dollars and auto financing debt is also in the hundreds of billions. (Globe and Mail,September 27, B1) No taxpayer bailout, no matter how big, will solve this problem (not that the bailouts of Wall Street investors is meant to help anyone but rich investors).
In other words, the "low wage/high debt" US economy is imploding. And Canadians, according to a recent report by investment firm Merill Lynch, are only slightly less in debt as the average American. (The Hamilton Spectator, September 24) What are the chances that Canadians will also start defaulting on their mortgages, credit cards, student debts, auto financing and a myriad of other debts which we have been forced to take on because our wages do not stretch far enough? Even without increasing food and oil prices, it is very likely that what we are seeing in the US today is only a frightening preview of things to come.
The US also provides a sneak peek into what is likely to happen if we leave the solution to the same people who got us into this mess: trillion dollar bailouts for the rich and increased repression for the rest of us. If we self-organize and struggle for a better alternative,the outcome may be different, perhaps radically so.
Common Cause
P.O. Box 347, Station E
772 Dovercourt Rd.
Toronto, ON, Canada,
M6H 4E3
Despite what may seem like "carping" above Molly is actually in general agreement with this article, believe it or not. While I may be upset by attempts to marry Keynesian economics to Marxist economics, especially as I consider the latter as a pseudo-science, I cannot disagree with the sense of "urgency" that the article conveys nor the rather abstract proposals that it ends with. To my mind the article has value in that it addresses the concerns of ordinary people, and I do not expect "perfection" (or even a close approach to it) in the efforts of any political tendency as young as the the new "organized anarchism". I also tend to agree, for different reasons than the author, that the "high debt" economy is unsustainable, and that is one of the major points that he is making. I would, however, rephrase the whole matter in different terms, but the essential point he is making is true.

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